Mr. Vice President,

Ladies and Gentlemen,

It is indeed a great pleasure for me to be here today at the State University of New York at Albany to address this gathering and to brief you on the New Industrial Policy of Cyprus for the Development of High Technology Industries in Cyprus.  I would like to take this opportunity to express my sincere thanks to our Trade Center in New York and the Cyprus Scientists Network for their wholehearted support for the organisation, in cooperation with you of course, of this visit to your University.

Cyprus΄ strategic location at the crossroads of three continents and its close proximity to the busy trade routes linking Europe with the Arab World and the Far East has been a major factor shaping its history throughout the centuries.  In recent years, this strategic location together with the excellent political and economic relations with our neighbours, our highly developed socio-economic infrastructure, excellent telecommunications, a sophisticated banking system, a wide range of high quality professional services and a favourable economic and business environment, make Cyprus an ideal Centre for business activities.

Cyprus has an open market economy with a large services sector. The role of the government is limited to indicative planning, infrastructure and the provision of public utilities.  Cyprus has achieved high rates of growth, while at the same time it was possible to maintain macroeconomic stability and social cohesion.  Its annual average growth, during the last three years was 4,7%, whereas the respective EU rate was 2.7%. The average inflation rate during the past few years was 2.9% and unemployment was near 3%, well below the EU levels. These achievements appear all the more striking, bearing in mind the severe economic and social dislocation created by the Turkish invasion of 1974 and the continuing occupation of the northern part of the island by Turkey.

Cyprus is a leading candidate for accession to the European Union.  It is a member of the World Trade Organisation, and it has trade agreements with 30 countries.  Cyprus has also signed 31 treaties for avoidance of double taxation, covering 39 states.

The impending membership to the European Union creates new prospects for our economy, guaranteeing access to the large EU market, but at the same time it demands significant changes, structural and technological, in order to maintain and increase competitiveness.  

Though the sector of manufacturing industry of Cyprus has contributed its share to this development of the economy of Cyprus and it continues to be very important to the economy accounting for about 10% of the GDP and 13% employment, yet this has been going through difficult times in recent years, experiencing at times a fall in the growth of production, exports and employment. This development has been the result of an erosion in our competitiveness, both abroad and in the local market, due to rising costs of production and insufficient productivity gains, at a time of increasingly intensified international competition. At the root of these problems lie the structural weaknesses of the sector, the low level of investment in new technology and low capacity utilization.

The effect of the slow rate of adaptation of the previously heavily protected local manufacturing industry to the new international business environment was made worse due to the gradual dismantling of protectionism measures within which the local industry has flourished during the early 80`s.

Taking into account the forthcoming challenges, stemming from the globalisation of the economies, the liberalisation of trade, the rapid technological changes, as well as the envisaged accession of Cyprus in the EU, the Ministry of Commerce, Industry and Tourism has proposed a New Industrial Policy, which was approved by the Council of Ministers last June 1999.

The New Industrial Policy consists of twelve chapters. The first two chapters refer to the promotion of high technology industries in Cyprus through the establishment of incubators and the creation of a Center for carrying out applied research and technological development in high technology fields. 

Both institutions aim at promoting the development of new innovative products in the industrial sector and bridging the gap between theoretical research and industry.  It is a well-known fact that technology today is changing at a very rapid pace and in order to keep up, especially in the high tech field, new research has to be carried out all the time for the development of new products or services.  The R&D Centre aims at promoting and sustaining this effort - the objective being to carry out research of an applied nature, which is geared towards developing specific new products or technologies that can be used for producing new products or services, as opposed to basic research, which aims at expanding the frontiers of human knowledge, without necessarily leading to immediate practical applications.

Despite our enormous efforts to start the "Programme for the creation of new enterprises of high technology and innovation" within the promised time schedule, yet recent developments in Cyprus regarding state aid cause some in the implementation of the project.  More specifically, Cyprus as a pre-accession country, enacted a few months ago a new piece of legislation, which in general terms abides with the European Union regulations regarding state aid. According to the new legislation, any new state aid has to be approved by the Commissioner of State Aid who was appointed recently.  The two programmes related to the creation of new enterprises of high technology and innovation through the business incubators have recently been approved by the Commissioner and will be, very soon,  forwarded to the Council of Ministers for the final approval.  Immediately after the final approval we will proceed with the implementation of the programs.

The Incubators that will be established under the program will be responsible to offer to the companies under incubation, that will be approved to participate in the Scheme, the following services either directly or through third parties:

• Assistance in the registration of a limited liability company according to the provisions of the Scheme.
• Assistance in the preparation and implementation of a business plan.
• Assistance in the implementation of a research and development plan
• Secretarial, accounting and legal assistance.
• Organisation of seminars on general matters relating to the educational needs of the companies under incubation.
• Scientific and advisory assistance facilitating access to infrastructure relating to the use of laboratories and assistance in finding associates.
• Assistance in finding the appropriate financing.
• Assistance in finding strategic investors.

The Government of Cyprus will provide a grant of  CY£57.000 ($87.000), over a three years period, to cover up to a 100% running expenses, such as personnel wages and salaries, purchase of equipment and consumables, rent and services and a grant of 15% on the initial investment for the purchase of land, building and equipment and on the acquisition of know-how.  The main income of the Incubators will come from the fees paid by the enterprises under incubation for the use of the premises and for the services offered.

The scheme for the creation on new high-tech or innovative enterprises is addressed to individuals or small groups of individuals who present a business plan promoting the development of an innovative idea. Applications that are submitted by groups of individuals that include non-Cypriots inventors shall also be considered.

This proposal should satisfy a number of criteria in order to become eligible for the scheme.

·        innovation

·        technological viability

·        market potential

·        the ability of the person to develop the idea within the proposed time limit and budget

·        the technical and management competence of the team

·        the benefits to the Cyprus economy

The applications of the interested individuals or teams shall be submitted to any of the incubators, provided that the incubator’s expertise will enhance the chances of success of the idea under incubation.

The incubator will make the first evaluation and, if necessary, shall assist the inventor to prepare a detailed business plan and to create a team for the implementation of the plan.  The evaluation made by the Incubator is expected to be detailed and it is desirable that the Incubator utilises the services of experts for that purpose.

The applications, which are initially approved by the Incubator, shall be transmitted to a Committee, established for this purpose by the Council of Ministers, for further evaluation and approval.  The Committee may require the views of specialists either from Cyprus or abroad regarding the technological and financial viability of the suggested plan. 

The evaluation procedure will also include, inter alia, an assessment of the degree of innovation of the product and patent search, which will be conducted by the Incubator in co-operation with the Office of the Registrar of companies or/and overseas patent agents.

The individual or team selected shall create a private company of limited liability. An agreement between the company, the Incubator and the Government will then be signed, which will specify the rights and obligation of each party.  The final distribution of the share capital, which shall be agreed between the inventor, the Incubator and the associate/investor, shall be stated in the application that will be submitted to the competent Committee for the provision of the government grant and, where the above application is approved, it shall be so stated in the relevant contracts that will be signed between the various parties.  It is noted that at least 50% plus 1 share shall belong to the inventor or inventors.

The Government of Cyprus will provide part financing up to the sum of CY£120.000 ($184.000) for projects aiming at the development of new high technology products, for a period of up to two years.  Applications for such projects may involve the participation of non-Cypriot Inventors or scientists.  The part financing will take the form of:

·        A grant of CY£57.000 ($87.000), over a three years period, to cover running expenses and purchase of equipment.

·        A grant of 15% on the initial investment for the purchase of equipment and on the acquisition of know-how.

·        A grant for research and technological development.       For this activity, according to the type of research, and especially the stage at which it reached (how far away is from the market) the grant to be provided may be 50% for industrial research and 25% for technological development.

The grant will be provided on the condition that the inventor or/and associate shall participate in the project with at least an amount of CY£10.000 ($15300).

The key features of today’s world economy is a rapid shift towards globalisation and information and communication technologies. These technologies determine the global competitiveness of all economic sectors and foster the emergence of new immaterial goods. In order to derive the maximum benefit from this process in terms of growth, competitiveness and employment special attention must be paid to the development, dissemination and use of these immaterial goods. Research and technological development, transformation of scientific and technological breakthroughs into industrial and commercial success, dissemination of technology, intellectual property rights are terms that should become the beacon that will guide us into the 21st century.

In concluding, I would like to thank you Mr. Vice President and all the organisers of this visit and I hope that this will give us a chance to discuss possible forms of co-operation and involvement of the University of Albany in the efforts of the Ministry of Commerce, Industry and Tourism of Cyprus in promoting new high technology industries in Cyprus.

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